Deal Drivers: APAC Q3 2021

Deal Drivers: APAC Q3 2021

A spotlight on mergers andacquisitions trends in 2021

Contents

Foreword: APAC M&A is back

Outlook: APAC heat chart

Summary: Records broken but pace slowing

Greater China

South Korea

Japan

India

Southeast Asia

Australia & New Zealand

About this report

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Foreword: APAC M&A is back

Tech controlOn the upside, technology businesses from across the APAC region are making an ever-louder splash on the global stage, with the fintech sector having seen a number of blockbuster deals in recent months. APAC’s natural strengths in areas including industrial manufacturing and energy also play to the region’s advantages as the global economy continues to recover from the pandemic.

Against this backdrop, M&A activity can continue at a reasonable pace, even if the trajectory of dealmaking following the immediate recovery from the pandemic now looks flatter. The practicalities of conducting M&A are also easing, as more countries open their borders and welcome back travelers. The third-quarter M&A data in this report underlines the point: 2021 continues to be a year in which dealmaking has re-established itself.

M&A activity across much of the Asia-Pacific region continues to bounce back from the lulls seen at the height of the COVID-19 crisis last year. Globally, the acceleration seen in the first half of 2021, in most countries at least, now looks to be normalizing, yet APAC volumes and values are proving resilient. Year-on-year comparisons for third-quarter M&A data make for healthy reading.

Clearly, however, the pandemic is not over. While economic growth has returned to the region following the contraction seen during last year’s lockdowns and societal restrictions, outbreaks of the virus continue to cause problems in the region. Low vaccination rates in many countries mean these outbreaks are all the more threatening.

For that reason, a shadow remains over the economy—and therefore for the prospects for dealmaking. There are good reasons to be optimistic for the fourth quarter and for 2022, but uncertainty remains elevated. Moreover, other headwinds also threaten M&A, from a sharp slowdown in the Chinese economy to the failure of Japan to shake off sluggish growth.

Source: Mergermarket

Heat chart based on potential companies for sale

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HotWarmCold

Industrials & chemicals

TMT

Consumer

Business services

Energy, mining & utilities

Pharma, medical & biotech

Financial services

Real estate

Construction

Leisure

Transportation

Agriculture

Defense

TOTAL

Gre

ater

Chi

na

Sout

h Ko

rea

Japa

n

Indi

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Sout

heas

t As

ia

Aust

ralia

&

New

Zea

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TOTA

L

492 59 21 41 51 24 688

289 62 27 63 85 68 594

143 36 13 48 48 72 360

180 9 23 26 41 40 319

160 6 3 27 39 47 282

134 21 10 46 27 32 270

123 8 6 35 56 36 264

116 2 6 4 41 8 177

106 5 1 11 22 2 147

60 12 13 11 18 19 133

51 9 3 10 28 12 113

20 1 3 13 20 57

3 1 4

1,877 229 127 326 469 380 3,408

Outlook: APAC heat chart

Note: The Intelligence Heat Charts are based on ‘companies for sale’ tracked by Mergermarket in the respective regions between April 01, 2021 and September 30, 2021. Opportunities are captured according to the dominant geography and sector of the potential target company.

Our forward-looking heat chart suggests that industrials and chemicals (I&C), and technology, media and telecoms (TMT) are the sectors most likely to see M&A activity in the final quarter of 2021 and beyond. The chart, based on the distribution of ‘companies for sale’ stories on the Mergermarket intelligence tool between April and September 2021, also points to Greater China as the likely hot spot for deal activity.

There were 688 stories about possible deals in the I&C sector in the six months to the end of September, with a further 594 stories flagging up potential TMT transactions. These two areas of the market were head and shoulders above the rest, with consumer (360 stories) and business services (319 stories), the only sectors that recorded even half as many upcoming deals.

More than half the stories flagged during this period (1,877) pointed to companies potentially for sale in Greater China. As in other parts of the APAC region, I&C and TMT companies look likely to prove hottest in Greater China. Elsewhere, Southeast Asia also looks set for another busy quarter, having seen 469 stories about companies for sale; Australia and New Zealand, with 380 stories, is another potential hotspot.

At the other end of the table, Japan looks set for a further period of more modest dealmaking, with only 127 companies flagged as potential targets. Defense, agriculture and transportation are seen as likely to be the least active areas of the market.

With a robust response to the pandemic in many Asia-Pacific countries last year, M&A in the region, along with the broader economy, was quicker to pick up in the second half of 2020. One year on, the recovery is continuing, but dealmaking is showing some early signs of deceleration.

Indeed, while APAC M&A deal volumes during the third quarter of 2021 showed a 23% year-on-year increase on 2020, with 1,315 transactions recorded, this was fractionally up on the second-quarter figure of 1,310.

Moreover, activity as measured by value was down further compared to 2020: Q3 saw a total of US$303.6bn, 5% lower than in the same period a year ago, and 22% down on the second quarter.

Nevertheless, it should be recognized that 2021 to date has been an exceptionally strong period for M&A across APAC. The first three quarters of the year saw 3,816 deals worth a total of US$896bn, up 30% and 49% in volume and value terms, respectively, compared to Q1-Q3 2020. These are the highest figures recorded since Mergermarket began surveying the M&A market in 2006.

Global catch-upStill, other regions have seen faster M&A growth this year. M&A volumes in the Americas rose by 51% year-on-year during the first three quarters of 2021, and by a staggering 185% in value terms. The Europe, Middle East, and Africa (EMEA) region also saw a bigger rise in deal activity; deal values jumped 100% over the same period while volumes rose by 49%.

However, this was to be expected. The APAC region—and China in particular—weathered the pandemic storm more successfully last year. The International Monetary Fund (IMF) estimates that economic growth across emerging and developed Asia was down by 0.8% in 2020, and actually up by 2.3% in China; by contrast, the world’s advanced economies shrank by 4.5%. In 2021, however, the Americas and Europe have moved back into positive territory.

Summary: Records broken but pace slowing

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APAC M&A activity, 2018-Q3 2021

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APAC top sectors by value I Q3 2021

APAC top sectors by volume I Q3 2021

APAC top bidders by value I Q3 2021

APAC top bidders by volume I Q3 2021

US$(m)

TMT 75,203 Energy, mining & utilities 67,702 Industrials & chemicals 42,991 Financial services 22,889 Consumer 21,991

Deal count

China 71,612USA 54,088Australia 46,346Singapore 20,213South Korea 17,643

Deal count

TMT 289Industrials & chemicals 258Business services 139Energy, mining & utilities 126Pharma, medical & biotech 122

US$(m)

China 500Australia 131Japan 129South Korea 119USA 110

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PE progressLooking forward, there are reasons to believe that the pace of M&A in the APAC region can be sustained or even strengthened. Not least, the strength of private equity (PE)activity continues to be remarkable. The PE sector was involved with 291 deals worth US$81.9bn during the third quarter of 2021, up 46% and 140% in volume and value terms respectively on the same period of 2020.

PE buy-out activity proved especially robust. There were 241 such deals in the third quarter, a 48% increase on the same period of last year. In value terms, the increase was even more significant, up by 115% to a total of US$61.5bn in the third quarter of 2021.

The figures for exit activity were lower, but here too dealmaking has accelerated sharply over the past year. The APAC region recorded exit values that more than tripled—from US$7.2bn in the third quarter of 2020 to US$26.7bn in the same period of 2021—while volume rose 56% to 81 transactions.

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Announceddate

Status* Bidder company Target company Sector Vendor company Deal value(US$m)

01-Aug-21 P Square, Inc. Afterpay Limited TMT 26,649

17-Aug-21 P Woodside Petroleum Limited BHP Petroleum International Pty Ltd


BHP Group Limited 13,715

21-Sep-21 P APA Group Ltd Ausnet Services Ltd Energy, mining & utilities

13,378

20-Sep-21 P Brookfield Asset Management Inc. Ausnet Services Ltd Energy, mining & utilities

13,061

31-Aug-21 P Siam Makro Public Co. Ltd. C.P. Retail Development Company Limited

Consumer Charoen Pokphand Group Co., Ltd.; Charoen Pokphand Foods Public Company Limited; CP ALL Plc

11,212

20-Jul-21 P Santos Ltd Oil Search Limited Energy, mining & utilities

8,769

20-Sep-21 P Sydney Transport Partners Sydney Motorway Corporation (49% Stake)

Transportation State Government of New South Wales

8,047

30-Sep-21 P XCMG Construction Machinery Co., Ltd.

Xugong Construction Machinery Group Co Ltd


Xuzhou Construction Machinery Group Co Ltd

5,981

04-Aug-21 P ESR Cayman Limited ARA Asset Management Limited

Real estate Warburg Pincus LLC; Ivanhoe Cambridge, Inc.; Sumitomo Mitsui Banking Corporation; New Horizon Capital; ARA Cayman

5,696

02-Aug-21 P Keppel REIT Singapore Press Holdings Ltd.

Real estate 5,109

*C = Completed; P = Pending

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APAC top 10 announced deals, Q3 2021Sector watchThe strength of M&A in certain sectors is also noteworthy. Most strikingly, the third quarter of 2021 saw 289 transactions worth US$75.2bn in the TMT sector. That represented an increase of 66% in volume terms and a rise of 15% by value.

In fact, deal volumes during the third quarter of 2021 were up on the same period a year ago in every sector of the APAC M&A market. The picture on deal values was more mixed, with financial services, real estate, and PMB, all in positive territory. EMU, I&C, and consumer all saw deal values fall back in the third quarter compared to the same period a year ago.

Fittingly, the largest transaction of all in the APAC region during the third quarter of the year came in the TMT sector, where the US payments business Square announced a US$26.6bn deal to acquire Australia’s Afterpay. The deal is part of an ongoing wave of consolidation in the fintech sector, as growing businesses look to acquire new competencies—in Square’s case, Afterpay’s strong “buy now, pay later” proposition was the attraction. The deal, once completed, will be Australia’s largest-ever M&A transaction.

The next three largest deals in the region over the third quarter all took place in the EMU sector, which was also the second busiest sector of the M&A market over the period.

Greater China

Value falls but smaller deals raise the volume as China slows down

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Having been a mainstay of APAC M&A activity during the first half of 2021, the Greater China region saw a drop-off in dealmaking over the third quarter. In the first two quarters of the year, Chinese transactions accounted for more than half of all APAC transactions by value, and more than a third by volume.

However, the 576 deals worth US$89bn recorded during Q3 did not come close to matching that. Indeed, while deal volumes rose 5% year-on-year, this was well below the 23% increase seen across APAC as a whole; deal values in Greater China fell 57% over the same period, compared to a drop of just 5% across the wider region.

China puts the brakes onThe easing in activity reflects a broader slowdown in the Chinese economy over the third quarter of the year. The country’s gross domestic product grew 4.9% year-on-year between July and September, according to data released by the National Bureau of Statistics, compared with 7.9% in the three months ending in June. On a quarter-on-quarter basis, growth was just 0.2%.

Two particular concerns worry economists. First, high levels of leverage in the struggling property market are increasingly seen as a significant risk, particularly as President Xi Jinping focuses on wealth redistribution and regulatory reform. Also, the country has faced an energy crisis that has prompted the introduction of power rationing and pushed factory gate inflation to its highest level for more than 25 years.

These pressures look set to continue. The think tank Oxford Economics has recently downgraded its forecast for fourth-quarter GDP growth in China from 5% to 3.6%; and in 2022, it now anticipates growth of 5.8%, down from its previous forecast of 5.4%. Further outbreaks of COVID-19, which has broken out again in parts of China in recent months after an extended lull, represent an additional threat to growth. Against this backdrop, dealmakers’ appetite for Chinese transactions may remain more limited, at least until the outlook is clearer.


Greater China M&A activity, 2018-Q3 2021

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China top sectors by value I Q3 2021

China top sectors by volume I Q3 2021

China top bidders by value I Q3 2021

US$(m)

Industrials & chemicals 25,737TMT 12,827Energy, mining & utilities 11,746Pharma, medical & biotech 9,094Real estate 6,136

Deal count

Industrials & chemicals 138TMT 95Energy, mining & utilities 71Pharma, medical & biotech 68Real estate 43

US$(m)

China 68,275Hong Kong 4,835USA 4,831Taiwan 3,833South Korea 2,473

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Sector specific Despite the downturn, the picture is more nuanced, then it may appear, with several sectors reporting strong figures.

In value terms, the I&C sector made the most significant contribution to third-quarter M&A in China, with US$25.7bn, though that was a third down on the same period of last year. TMT was the next most important sector, with US$12.8bn of deals, a fall of only 3% on the third quarter of 2020.

In volume terms, Greater China’s data looks more robust. TMT, EMU, and PMB all saw increases in transaction numbers, year-on-year, during Q3. Indeed, in the case of EMU, deal volumes rose by 39% compared to Q3 2020, to 71 transactions. Overall, I&C was the most active sector of the market, recording 138 deals during the third quarter, though this was 4% down on the same period a year ago.

PE activity has been another bright spot for M&A in Greater China. The third quarter of the year saw PE firms involved in 76 deals worth a total of US$15.4bn in the region; that was up 33% in volume terms and 26% by value on the same period a year ago. There has been something of a slowdown, with third-quarter deal values down compared to the second quarter, when they totaled US$21.6bn. But that is reflective of PE getting involved in more smaller deals; indeed, third-quarter PE transaction volumes in Greater China were up on the previous three months, with 69 deals announced.

China top bidders by volume I Q3 2021

Deal count

China 494Hong Kong 31USA 12Taiwan 7Japan 5Sweden 5

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Announceddate


30-Sep-21 P XCMG Construction Machinery Co., Ltd.

Xugong Construction Machinery Group Co Ltd Industrials & chemicals

Xuzhou Construction Machinery Group Co Ltd

5,981

03-Sep-21 P JD.com, Inc. China Logistics Property Holdings Co., Ltd. (90.1% Stake)

Transportation Yupei International Investment Management Co., Ltd

3,136

07-Aug-21 P GD Power Development Co., Ltd.

China Energy Investment Corporation Jiangxi Energy Co., Ltd.; China Energy Group Shandong Power Co., Ltd.; China Energy Group Fujian Energy Co., Ltd.; China Energy Group Guangdong Power Co., Ltd.; China Energy Group Hainan Power Co., Ltd.; China Energy Group Ledong Power Generation Co., Ltd.; China Energy Group Hainan Energy Sales Co., Ltd.; China Energy Group Haikong New Energy Co., Ltd. (65.43% Stake); China Energy Group Hunan Power Co., Ltd.; China Energy Group Baoqing Power Generation Co., Ltd. (90.49% Stake); China Energy Group Hunan Wushui Hydropower Development Co., Ltd. (85.78% Stake)


CHN ENERGY Investment Group Co.,LTD

3,100

12-Aug-21 P China Development Financial Holdings Corporation

China Life Insurance Company Limited [Taiwan] (44.05% Stake)

Financial services

2,496

02-Aug-21 P Netmarble Corporation SpinX Games TMT A group of 6 shareholders led by Brk Fortune Limited

2,190

25-Aug-21 P Rizhao Steel Holding Group Company Limited

Minmetals Yingkou Medium Plate Co., Ltd. (54.04% Stake)


China Minmetals Corporation

2,131

16-Sep-21 P Poema Global Holdings Gogoro Inc. Industrials & chemicals

2,011

10-Aug-21 P Shenzhen Expressway Co., Ltd.

Shenzhen Investment Holdings Bay Area Development Company Limited (71.83% Stake)

Construction Shenzhen Investment Holdings Co., Ltd.

1,936

25-Sep-21 P SEC Electric Machinery Co., Ltd.

Tianjin Beiqing Electric Smart Energy Co., Ltd Energy, mining & utilities

An investor group led by Tianjin Fuqing Investment Co., Ltd.

1,895

07-Aug-21 P Beijing Hualian Hypermarket Co., Ltd.

Innovation Metal Co., Ltd. Industrials & chemicals

Shandong Innovation Group

1,870


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Greater China top 10 announced deals, Q3 2021Small is beautifulThis move toward smaller transactions in Greater China has been one theme of the past three months—hence the growth in volume compared to the decline in deal values.

The largest deal of the period is a case in point. Heavy machinery manufacturer XCMG’s acquisition of Xugong Construction Machinery was worth just US$5.9bn, a relatively small transaction by historical standards. In the third quarter of 2020, for example, the four biggest deals in Greater China were all valued at more than twice the size of the XCMG-Xugong tie-up. The largest of those deals was worth almost US$50bn. Given the slowdown in the economy, it is likely these lower-value deals will replace the recent spate of megadeals for the foreseeable future. For the time being, it looks like volume over value.

South Korea

The world’s biggest TV show and an M&A revival put the spotlight on South Korea

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This year’s biggest TV show, Netflix’s Squid Game, appears to have struck a chord worldwide with its depiction of the impacts of high levels of debt on society and its portrayal of inequality.

And in South Korea, where the show is set, these are key issues in March’s Presidential elections; while strong exports and an impressive healthcare response propelled the country to one of the fastest recoveries from the pandemic last year, there is growing concern about the widening gap between rich and poor.

Growth spurtPopulist politics and electoral uncertainty now loom large for South Korea’s economy, which has performed strongly so far this year; indeed, growth of 5.9% year-on-year during the second quarter of 2021 was its best performance for more than a decade, supported by increased consumer spending.

But there are other risks too: South Korea’s exports-driven economy could be damaged by the global supply chain disruption of recent months, while the slowdown in China, the destination for 28% of the country’s exports, is also a worry.

Meanwhile M&A activity in South Korea has proved robust. The third quarter of the year saw 119 transactions in the country worth a total of US$17.9bn. That was an increase of 34% in volume compared to the same period of 2020 and a rise of 62% by deal value.

It should be acknowledged that the third quarter of the year has traditionally been less busy for South Korean M&A—and this year’s figures are a little down on the second quarter—but dealmaking has certainly held up well.


South Korea M&A activity, 2018-Q3 2021

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South Korea top sectors by value I Q3 2021

South Korea top sectors by volume I Q3 2021

South Korea top bidders by value I Q3 2021

US$(m)

Industrials & chemicals 7,124Pharma, medical & biotech 3,925TMT 2,397Consumer 2,123Financial services 616

Deal count

Industrials & chemicals 41TMT 27Consumer 14Pharma, medical & biotech 13Business services 7

US$(m)

South Korea 14,086China 1,526Singapore 1,467Taiwan 447Hong Kong 162

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South Korea top bidders by volume I Q3 2021 Deal count

South Korea 106Singapore 4USA 2China 2Taiwan 1

Sectoral shiftsOne growth engine has been the strong PE interest in South Korean businesses. PE firms were involved in 43 deals worth US$10bn during the third quarter of the year, an increase on the same period a year ago of 30% in volume terms and of 78% by deal values. Notwithstanding South Korea’s record of more muted dealmaking during this period of the year, 2021’s PE activity, in value terms at least, reached a new high in the third quarter.

The strength of the I&C sector has been another key factor in the overall M&A figures for South Korea. Deals for I&C businesses totaled US$7.1bn during the third quarter of the year, a 111% increase on last year’s total of US$3.4bn in the same period.

The performance of the PMB sector was even more impressive, albeit from a lower base. Total Q3 2021 deal value of US$3.9bn was 661% up on 2020. TMT (deal values up by 322% year-on-year) and consumer (233%) also made significant contributions.

South Korea top bidders by volume also saw 1 deal each from Japan, Hong Kong, the United Kingdom, and Luxembourg.

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Announceddate


13-Aug-21 P DTR Automotive Corporation Doosan Machine Tools Co., Ltd. Industrials & chemicals

MBK Partners Inc. 2,444

16-Sep-21 P Aprogen Medicines Aprogen, Inc. (95.73% Stake) Pharma, medical & biotech

1,593

25-Aug-21 P A consortium led by CBC Group Hugel, Inc. (46.85% Stake) Pharma, medical & biotech

Bain Capital, LP. 1,479

20-Aug-21 P SK Holdings Co., Ltd. SK Materials Co., Ltd. (42.4% Stake)


1,331

26-Jul-21 P GIC Private Limited; E-MART Inc. Starbucks Coffee Korea Co., Ltd. (50% Stake)

Consumer Starbucks Corporation 1,297

13-Aug-21 P A consortium led by GS Retail Delivery Hero Korea LLC TMT Delivery Hero SE 689

06-Sep-21 P Ecopro Co., Ltd. Ecopro HN Co., Ltd. (40% Stake)


551

16-Jul-21 P Green Cross Lab Cell Corporation Green Cross Cell Corporation Pharma, medical & biotech

482

29-Jul-21 P LG Chem, Ltd. LG Electronics (CEM (Chemical Electronic Material) business)


LG Electronics, Inc. 455

17-Aug-21 P Fubon Life Insurance Co., Ltd.; Taipei Fubon Commercial Bank Co Ltd; Hyundai Commercial Inc.

Hyundai Card Co., Ltd. (24% Stake)

Financial services

AlpInvest Partners B.V.; GIC Private Limited; Affinity Equity Partners Ltd.

447


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Domestic blissIt should be noted that to some extent at least, these sectoral figures reflect the impact of a handful of larger deals. In the I&C sector, for example, deal volumes rose from 34 in the third quarter of 2020 to 41 this year, an increase of 21%. Similarly, transaction activity in the PMB sector (up 86%), in TMT (108%), and in consumer (17%) raced ahead less quickly than deal value.

It is also the case that South Korea’s M&A market remains largely a domestic affair. Of the 119 deals agreed in the third quarter of the year, 106 featured a South Korean acquirer. By value, domestic buyers accounted for US$14.1bn of the quarter’s US$17.9bn of deals. One notable exception was the deal between Starbucks and GIC, the Singaporean sovereign wealth fund; the US coffee giant is selling its stake in its joint venture in South Korea to its local partner E-Mart, as well as GIC, for US$1.3bn.

In the biggest deal of the quarter, DTR Automotive, a manufacturer of batteries, tires, and auto parts, announced the acquisition of Doosan Machine Tools for US$2.4bn in the I&C sector. DTR is acquiring the business from the PE firm MBK Partners, which has owned it since 2016.

In fact, I&C businesses accounted for four of South Korea’s 10 largest M&A transactions in the third quarter, with PMB businesses taking a further three of these slots.

South Korea top 10 announced deals, Q3 2021

Japan

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Japan may be the second largest economy in the region, but it has struggled to bounce back from the pandemic at the pace of its counterparts in the West. The country was slow to get going with its vaccination program and a series of additional outbreaks of the virus this year have threatened its recovery. The third quarter even saw the Japanese government forced to warn of stronger restrictions in a number of large cities to slow the spread of COVID-19.

The numbers speak for themselves. Economic output in the second quarter rose by just 0.3%, following a 0.9% decline in the first three months of the year; some analysts believe the third quarter saw a return to negative growth rates.

For the year as a whole, the IMF predicts the Japanese economy will grow by 2.4% in 2021 and 3.2% in 2022, compared to its forecasts of 5.2% and 4.9% for advanced economies in aggregate.

Dealmaking downturn This sluggishness is mirrored in weaker M&A figures in Japan than in some of its neighbors. Japan saw 126 deals worth a total of US$11.6bn during the third quarter. Although that was 10% more deals in volume terms than a year ago, it was an 80% fall in transaction values. Moreover, the third quarter figures were the weakest of the year so far.

In fairness, some sectors have been brighter than others, at least in terms of the number of deals. Looking at deal volumes in particular, Japan’s consumer, I&C and business services sectors all saw higher transaction numbers in the third quarter of 2021 than in the same period a year previously. EMU, with eight deals, matched last year’s total.

In terms of value, however, the decline in M&A has been significant. The strongest sector of Japan’s M&A market during the third quarter of the year was TMT, with US$3.7bn worth of transactions. This was 91% down on Q3 2020, although that quarter’s deal figures were skewed by the US$40.4bn deal between NTT and DoCoMo.

Elsewhere, the PMB and the real estate sectors both recorded third-quarter deal values that were more than 80% down on the same period a year ago. Only I&C produced broadly comparable deal values, with a decline of only 5%.


Japan M&A activity, 2018-Q3 2021

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Quarterly slowdown as Japan deals with COVID-19 outbreaks and increased restrictions

Japan top sectors by value I Q3 2021

Japan top sectors by volume I Q3 2021

Japan top bidders by value I Q3 2021

Japan top bidders by volume I Q3 2021

US$(m)

TMT 3,651Construction 1,864Industrials & chemicals 1,790Financial services 1,089Consumer 828

Deal count

Japan 112USA 8United Kingdom 2China 1Taiwan 1

Deal count

TMT 23Consumer 22Industrials & chemicals 21Business services 17Pharma, medical & biotech 11

US$(m)

USA 6,730Japan 4,559United Kingdom 208South Korea 122Taiwan 13

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PE and outsiders lose interest Part of the story of Japan’s M&A slowdown in the third quarter was diminishing interest from PE firms. There were 11 deals involving financial sponsors during the third quarter of the year, a 54% decrease on the same period of 2020—and an even worse decline compared to the second quarter, which recorded 27 PE transactions. A handful of larger deals in the third quarter did, however, mean that aggregate transaction values rose to US$4bn, compared to US$3.1bn in the third quarter of 2020.

Foreign interest in Japanese companies has also been limited. Of the 126 deals recorded over the third quarter, only 14 involved an overseas acquirer. That said, US buyers of Japanese businesses did account for more than half of the country’s M&A activity by deal value, largely because of the size of the PayPal-Paidy transaction.

Other large deals in the quarter included RoadMap Holdings’ acquisition of a 43% stake in Nippo Corporation in the construction sector, and SBI’s purchase of 28% of Shinsei Bank in a deal valued at US$1.8bn. SBI is one of Japan’s largest online financial services businesses and its transaction reflects a similar phase of consolidation in Japan’s fintech sector to that being seen elsewhere in Asia. Indeed, the PayPal acquisition of Paidy, a specialist ‘buy now pay later’ lender, mirrors Square’s purchase of Afterpay in Australia.

Japan top bidders by volume also saw 1 deal each from Singapore and South Korea.

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Announceddate


07-Sep-21 C PayPal Holdings, Inc. Paidy Inc. TMT Shinsei Bank, Limited; Itochu Corporation; Wellington Management Company LLP; Eight Roads Ventures

2,730

07-Sep-21 P RoadMap Holdings NIPPO CORPORATION (42.99% Stake)

Construction 1,864

09-Sep-21 P SBI Holdings, Inc. Shinsei Bank, Limited (27.68% Stake)

Financial services

1,059

30-Sep-21 P Apollo Global Management, LLC

Mitsubishi Chemical Corporation (polycrystalline alumina fiber business)


Mitsubishi Chemical Corporation

765

03-Aug-21 C Houlihan Lokey, Inc. GCA Corporation (81.19% Stake) Business services

509

13-Sep-21 P Z Holdings Corporation; NAVER Corporation

Demae-can Co., Ltd. (27.95% Stake)

TMT 466

10-Sep-21 P Mitsui Chemicals Agro, Inc. Meiji Seika Pharma (agricultural chemical manufacturing and sales business)


Meiji Seika Pharma Co., Ltd. 425

02-Aug-21 P The Carlyle Group Kokusai Kogyo Co., Ltd.; JAG Energy Co., Ltd. (65% Stake)

Business services

Japan Asia Group Limited 417

31-Aug-21 P H2O Retailing Corporation Kansai Super Market Ltd. (47.34% Stake)

Consumer 406

02-Aug-21 P Foot Locker Inc Text Trading Company, K.K. Consumer 360


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Japan top 10 announced deals, Q3 2021Slow but steady vaccination campaign Even prior to the sudden shock of the COVID-19 pandemic, Japan’s economy was experiencing sluggish growth. A slow start to the national vaccination campaign and several deadly waves of infections has meant a more subdued recovery from the downturn than its neighbors. By late October 2021, however, over 75% of the population had been fully inoculated—one of the highest vaccination rates among G7 countries.

The new government formed by incoming prime minister Fumio Kishida will face considerable challenges to improve GDP growth. But thanks to the high level of vaccinations, the government has been able to lift restrictions and the stage is now set for a more sustained economic recovery.

India

As the country recovers from the devastating lows of the pandemic, dealmaking is back on a high

21

India is recovering from the pandemic at pace. Having suffered one of the worst crises in the world, with repeated outbreaks of the virus causing huge human suffering and economic disruption—and prompting the Indian government to take tough action—the country’s bounce back since the last lockdowns in the spring has been impressive.

The IMF now expects Indian GDP growth to hit 9.5% for 2021 as a whole, a faster rate of growth than it anticipates from any other major economy in the world. Moreover, the IMF thinks India will repeat the trick next year, with growth of 8.5% again enough to top the rankings. For some periods, growth will be even faster: the Asian Development Bank expects GDP to increase by 10% over the 12 months to 31 March 2022.

Rising fastGrowth rates have put a rocket under the Indian stock market, with equities on target for their strongest performance since 2017. The BSE Index was up by more than 20% for the year by the end of Q3—and by more than 25% since the market low in April, when the second wave of COVID-19 struck the country.

As for M&A activity, this buoyant backdrop has seen a wave of dealmaking in the country. Each quarter of the year so far has seen increases in both deal volumes and values. In the third quarter, India saw 158 transactions worth US$30.2bn; that was up 70% in volume compared to the same period of last year, and 25% in value terms.


India M&A activity, 2018-Q3 2021

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India top sectors by value I Q3 2021

India top sectors by volume I Q3 2021

India top bidders by value I Q3 2021

India top bidders by volume I Q3 2021

US$(m)

TMT 17,738Financial services 5,169Business services 2,612Energy, mining & utilities 1,925Pharma, medical & biotech 1,302

Deal count

India 66USA 44Singapore 7Switzerland 5Hong Kong 5Canada 5

Deal count

TMT 64Business services 16Financial services 15Industrials & chemicals 14Energy, mining & utilities 12Pharma, medical & biotech 12

US$(m)

India 6,702USA 5,642Netherlands 4,727Singapore 4,650Japan 2,719

Outside influenceAs with the stock market, where the return of foreign investors has been an important driver of rising share prices, so India’s M&A market has been boosted by overseas interest. Of those 158 transactions, international buyers accounted for more than half—92 in all—with US acquirers especially active. By value, domestic deals accounted for barely more than a fifth of all Q3 activity.

Significant appetite for Indian M&A among PE firms has been another driver of rising dealmaking. So far this year, PE firms have been involved with 231 deals worth US$47.8bn in India—more, in value terms, than the whole of 2019 and 2020 combined. PE deals have now risen for five quarters straight, culminating in the third quarter when there were 89 such transactions worth US$20.7bn. That was a 123% increase in volume terms on the same period a year ago, and a 219% increase by value.

India’s TMT sector has attracted particularly strong interest, with 64 deals worth US$17.7bn during Q3—nearly triple Q3 2020.

While dwarfed by the scale of dealmaking in the TMT sector, other sectors also saw significant activity. There were 15 deals in financial services worth US$5.2bn in Q3, compared to eight deals worth US$1.2bn last year. Business services, EMU, and PMB all saw big increases too.

The outlier was the I&C sector, where deal values fell from US$3.8bn in the third quarter of 2020 to US$459m in the same period of this year. Deal volumes in 2021 were up on the previous year, however, with 14 transactions this year, compared to 10 in 2020.

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Announceddate


31-Aug-21 P PayU Payments Private Limited Indiaideas.com Limited TMT Temasek Holdings Pte. Ltd.; General Atlantic Service Company, L.P.; TA Associates Management, LP.

4,727

12-Jul-21 C Walmart Inc.; Khazanah Nasional Berhad; Franklin Resources, Inc.; GIC Private Limited; Canada Pension Plan Investment Board; Tiger Global Management, LLC; Tencent Holdings Ltd.; Qatar Investment Authority; Antara Capital; SoftBank Investment Advisers; Willoughby Capital; DisruptAD

Flipkart Internet Pvt Ltd. TMT 3,600

06-Jul-21 P Sumitomo Mitsui Financial Group, Inc. Fullerton India Credit Co. Ltd. (74.9% Stake)

Financial services

Fullerton Financial Holdings Pte. Ltd.

2,000

10-Aug-21 P Baring Private Equity Asia Hinduja Global Solutions (healthcare services business)

Business services

Hinduja Global Solutions Ltd.

1,200

13-Aug-21 P Partners Group Holding AG Atria Convergence Technologies Private Limited

TMT TA Associates Management, LP.; Sofina SA; True North

1,200

25-Aug-21 P Blackstone Group Inc ASK Investment Managers Pvt. Ltd. (74% Stake)

Financial services

Advent International Corporation

1,000

03-Sep-21 P HDFC Life Insurance Company Limited Exide Life Insurance Company Limited

Financial services

Exide Industries Limited

916

16-Sep-21 P Serum Institute of India Pvt. Ltd. Biocon Biologics India Limited (15% Stake)

Pharma, medical & biotech

735

16-Jul-21 P Reliance Retail Ventures Limited Just Dial Limited (58.97% Stake)

TMT 674

26-Jul-21 P Equitas Small Finance Bank Limited Equitas Holdings Private Limited

Financial services

674


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India top 10 announced deals, Q3 2021Fintech feverAs in several other areas of the APAC region, consolidation and the battle for scale in the payments sector was the trigger for the biggest third-quarter deal in India. Netherlands-headquartered fintech firm PayU, owned by Naspers, the South African e-commerce and media group, agreed to pay US$4.7bn for Indiaideas.com, which operates online payment service BillDesk.

The next biggest deal also took place in the TMT sector, with US retail giant Walmart winning the race to buy e-commerce group Flipkart, agreeing to pay US$3.6bn. Indeed, four of the top 10 Indian M&A deals in the third quarter took place in the TMT sector, with financial services accounting for a further four.

Southeast Asia

25

Much of Southeast Asia continues to struggle with the pandemic. Indonesia, Thailand, Malaysia, and Vietnam all reported sharp rises in daily COVID infections and deaths in recent months. That has forced governments across the region to impose—or reimpose—restrictions on society, and has prompted criticism of the often slow roll-out of vaccines.

The economic impacts of the virus are also being felt on an ongoing basis. That’s a problem for the world, given Southeast Asia’s crucial role in the global manufacturing supply chain, with the issues contributing to shortages of goods ranging from semiconductors to coffee.

And the pain is being felt locally too: the Asian Development Bank has recently slashed its growth forecasts for the region; it now expects Southeast Asia’s GDP to grow by only 3.1% over 2021, having previously anticipated 4.4%.

Value rockets, volume steadyHowever, this disappointing backdrop does not appear to have dented enthusiasm for M&A in the region, with significant levels of activity taking place throughout the year. Deal values over the first three quarters of 2021 totaled US$149.3bn, nearly three times the total activity seen during the whole of 2020; indeed, the figure is higher than any annual total Mergermarket has ever recorded for Southeast Asia.

The figures for deal volumes tell a slightly different story. There were 329 transactions in Southeast Asia over the first nine months of the year, compared to 364 deals in all of 2020. The region is on target to beat last year’s numbers, but by nowhere near the same margin as on deal values.

Moreover, the data for the third quarter alone—as those COVID-19 outbreaks have resurfaced—points to a slowing of the pace. There were 109 deals worth US$47.4bn in Southeast Asia between July and September this year. While that was 35% up on the third quarter of 2020 by deal volume, and 473% up by value, dealmaking activity has declined since the second quarter of this year.


Southeast Asia M&A activity, 2018-Q3 2021

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Despite the ongoing COVID concerns, dealmaking is on the rise

SE Asia top sectors by value I Q3 2021

SE Asia top sectors by volume I Q3 2021

SE Asia top bidders by value I Q3 2021

SE Asia top bidders by volume I Q3 2021

US$(m)

Real estate 12,575Consumer 11,564TMT 7,483Industrials & chemicals 7,309Financial services 4,101

Deal count

Singapore 21Malaysia 16USA 14Thailand 8South Korea 7

Deal count

TMT 26Industrials & chemicals 20Business services 15Financial services 13Energy, mining & utilities 9

US$(m)

Singapore 13,179Thailand 12,573Hong Kong 7,785USA 4,283Indonesia 3,587

26

Making up for lost timeIn practice, two factors explain the remarkable headline numbers for Southeast Asian M&A over the first nine months of 2021. First, they compare to a very poor year for dealmaking in 2020; while the region saw the same sharp drop-off in activity in the second quarter of last year as the rest of the world, unlike other regions, it did not record a significant recovery in the second half.

Second, this year’s deal values figures have been inflated by the huge deal between the US-listed special purpose acquisition (SPAC) vehicle Altimeter Growth and Singapore-based Grab. In April, Altimeter announced a deal to buy Grab—which operates everything from ride-sharing apps to e-commerce services—for US$34.7bn. By contrast, the largest transaction recorded in Q3 was a more modest affair. Siam Makro’s US$11.2bn acquisition of the Thailand-based supermarkets operator CP Retail, was effectively an internal reorganization; the deal saw parent company CP All transfer its ownership of CP Retail to Siam Makro, another of its subsidiaries.

SE Asia top bidders by volume also saw 7 deals each from Hong Kong and Vietnam.

27

Announceddate


31-Aug-21 P Siam Makro Public Co. Ltd. C.P. Retail Development Company Limited

Consumer Charoen Pokphand Group Co., Ltd.; Charoen Pokphand Foods Public Company Limited; CP ALL Plc

11,212

04-Aug-21 P ESR Cayman Limited ARA Asset Management Limited

Real estate Warburg Pincus LLC; Ivanhoe Cambridge, Inc.; Sumitomo Mitsui Banking Corporation; New Horizon Capital; ARA Cayman

5,696

02-Aug-21 P Keppel REIT Singapore Press Holdings Ltd.

Real estate 5,109

13-Jul-21 P Ivanhoe Capital Acquisition Corp. SES Holdings Pte. Ltd. Industrials & chemicals

3,110

22-Sep-21 P Temasek Holdings Pte. Ltd. SembCorp Marine Limited (53.39% Stake)


3,073

02-Aug-21 C VPC Impact Acquisition Holdings II FinAccel Pte Ltd. Financial services

2,000

06-Sep-21 C Profesional Telekomunikasi Indonesia PT (Protelindo)

Solusi Tunas Pratama Tbk, PT (94.03% Stake)

TMT 1,655

27-Sep-21 P JERA Co., Inc. Aboitiz Power Corporation (27% Stake)


Aboitiz & Company Inc; Aboitiz Equity Ventures, Inc.

1,580

23-Jul-21 P Bridgetown 2 Holdings Limited PropertyGuru Limited TMT 1,352

16-Sep-21 P Indosat Tbk, PT Hutchison 3 Indonesia PT TMT CK Hutchison Holdings Limited; PT Tiga Telekomunikasi

1,294


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Southeast Asia top 10 announced deals, Q3 2021Sector watchStill, while the pace has slowed somewhat in Q3, activity levels remain healthy compared to 2020. And certain sectors have been particularly active.

In terms of deal volumes, TMT was the busiest of all during the third quarter, recording 26 deals, up from 16 in the same period of 2020. I&C saw an even quicker acceleration, with 20 deals, up from nine a year ago, while business services recorded 15 transactions compared to 13 last year. Financial services also saw higher deal volumes than in the same quarter of 2020.

On deal values, the real estate and consumer sectors set the pace. The former recorded US$12.6bn in Southeast Asia over Q3, up from US$396m in the same quarter last year, while the latter produced US$11.6bn worth of deals, compared to US$2.4bn in the third quarter of 2020. TMT and I&C also registered significant jumps in deal values.

The real estate data reflects two significant deals. Hong Kong- based logistics real estate developer ESR Cayman paid US$5.7bn for the Singaporean real estate fund management firm ARA Asset Management, while Singaporean Keppel REIT’s takeover of the non-media business of Singapore Press Holdings was worth US$5.1bn.

Australia & New Zealand

29

Biggest deal of the quarter boosts Oceania’s earningsSquare’s deal to buy Afterpay for US$26.6bn helped propel the Australia and New Zealand region to its highest ever quarterly value figure. In all, the two countries saw US$98.1bn worth of M&A between July and September—that represented a near 10-fold increase on the US$10bn of activity recorded during the same period last year.

However, it would be wrong to characterize the quarter’s strong data as simply a one-off effect of the Afterpay transaction, though it was Australia’s largest-ever M&A deal. Even stripping out the value of the transaction, Australia and New Zealand delivered deals worth US$71.5bn during Q3; that was still far ahead of the same period of 2020, and a significant improvement on the second-quarter 2021 figure of US$43.9bn.

Moreover, the data on deal volumes underlines the health of M&A in the region. There were 214 transactions in Australia and New Zealand, up 59% on the 135 deals recorded in the same period of last year. Volumes also held up well against the second quarter of 2021, when there were 213 transactions in the region.

Economic recoveryThis strength of activity reflects the prevailing economic conditions, both in Australia and New Zealand themselves, and globally.

In Australia, for example, tough early action on COVID-19 saw the country’s economy perform more strongly than its international peers last year, with a contraction of only 2.5% according to the OECD; the group has just downgraded its forecast for growth in 2021, amid anxiety about outbreaks of the virus in several major cities, but it still expects expansion of 4% this year.

In New Zealand, meanwhile, the OECD sees economic growth picking up gradually during the second half of the year, as the country reopens its borders following some of the toughest COVID-19 restrictions anywhere in the world. It is predicting growth of 3.5% this year, accelerating to 3.8% in 2022.

Australia, in particular, should also benefit from the global economic recovery, which has already significantly boosted demand for many of the commodities and raw materials that it exports. The ongoing spike in many commodity prices, particularly in the energy sector, promise increased profitability.

Australia & New Zealand M&A activity, 2018-Q3 2021


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EMU beats TMTDespite the size of the Afterpay transaction, TMT did not record the highest sectoral deal value during Q3. Instead, EMU saw total transactions worth US$42.8bn between July and September, a huge increase on last year’s figure of US$1.5bn for the same period. Still, TMT did deliver US$30.9bn, compared to US$844m last year.

In fact, EMU deals accounted for three of the top four largest transactions over the quarter—and four of the top 10. Prominent transactions included Woodside Petroleum’s announcement of a US$13.7bn deal to buy the petroleum assets of BHP Group, and the battle for the utility giant AusNet between Brookfield Asset Management and APA Group.

In terms of volume, TMT did see more activity than any other sector, with 51 deals over the quarter, double last year’s third-quarter total of 25. Business services, with 34 deals, up from 29, and financial services, with 23 deals compared to 15 last year, also recorded significant levels of activity.

ANZ top sectors by value I Q3 2021

ANZ top sectors by volume I Q3 2021

ANZ top bidders by value I Q3 2021

US$(m)

Energy, mining & utilities 42,763TMT 30,982Transportation 9,081Financial services 7,080Business services 2,511

Deal count

TMT 51Business services 34Financial services 23Energy, mining & utilities 21Industrials & chemicals 20

US$(m)

Australia 46,092USA 32,484Canada 13,140Sweden 2,449China 1,057

ANZ top bidders by volume I Q3 2021

Deal count

Australia 128USA 30New Zealand 11United Kingdom 8Sweden 5Hong Kong 5

31

Announceddate


01-Aug-21 P Square, Inc. Afterpay Limited TMT 26,649

17-Aug-21 P Woodside Petroleum Limited BHP Petroleum International Pty Ltd


BHP Group Limited 13,715

21-Sep-21 P APA Group Ltd Ausnet Services Ltd Energy, mining & utilities

13,378

20-Sep-21 P Brookfield Asset Management Inc. Ausnet Services Ltd Energy, mining & utilities

13,061

20-Sep-21 P Sydney Transport Partners Sydney Motorway Corporation (49% Stake)

Transportation State Government of New South Wales

8,047

23-Aug-21 P KKR & Co. Inc.; Ontario Teachers' Pension Plan; Public Sector Pension Investment Board

Spark Infrastructure Group Financial services

3,721

11-Aug-21 P EQT Partners AB Iress Limited TMT Greencape Capital 2,409

23-Aug-21 P Ampol Ltd Z Energy Limited Energy, mining & utilities

1,769

20-Sep-21 P Host-Plus Pty Limited; Charter Hall Long WALE REIT

ALE Property Group Real estate 1,214

20-Sep-21 C FountainVest Partners ZIWI Limited Consumer 1,057


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Australia & New Zealand top 10 announced deals, Q3 2021PE and inbound activity strongOne other driver of dealmaking activity in Australia and New Zealand this year has been major PE interest in the region. Firms have been involved with 119 deals worth US$37.1bn so far in 2021, including 39 deals worth US$17.9bn in the third quarter of the year. This year’s PE activity, in value terms, has already exceeded the total recorded in the whole of 2019 and 2020 combined.

The region also continues to attract significant interest from overseas acquirers, with Square’s deal for Afterpay only the largest example of a growing number of cross-border transactions. Of the 214 transactions announced over the third quarter of 2021, foreign bidders were involved in more than a third—75 in all. US buyers, accounting for 30 deals, led the way, followed by the UK (11) and Sweden (eight).

About this reportProduced in partnership with Mergermarket, an Acuris companyEditors (Acuris Studios): Julian Frazer, Yining Su

For a full version of the Mergermarket M&A deal database inclusion and league table criteria, go to: www.mergermarket.com/pdf/deal_criteria.pdf

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Deal Drivers: APAC Q3 2021